Eduardo Perez Mendoza et al v. Ronkar Deliveries LLC

TENTATIVE RULINGS

FOR: August 28, 2026

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CIVIL LAW & MOTION CALENDAR – Hon. Cynthia P. Smith, Dept. A (Historic Courthouse) at 8:30 a.m.

Eduardo Perez Mendoza et al v. Ronkar Deliveries LLC 23CV001390 Eduardo Perez Mendoza et al v. Ronkar Deliveries LLC 24CV002048

[1] MOTION TO COMPEL ARBITRATION (filed 1/28/26 in case no. 24CV002048) [2] MOTION TO COMPEL ARBITRATION (filed 2/24/26 in case no. 23CV001390)

TENTATIVE RULING: The motions are DENIED.

A. PROCEDURAL BACKGROUND

1. Plaintiffs’ Complaints

On October 27, 2023, Plaintiffs Eduardo Perez Mendoza (“Mendoza”) and Salvador Vidales Chavez (“Chavez”) (collectively, “Plaintiffs”), individually, and on behalf of the State of California and other aggrieved persons filed a PAGA Representative Action Complaint against Defendant Ronkar Deliveries LLC (“RD” or “Defendant”) in Case No. 23CV001390 (“PAGA Action”). Over a year later, on November 20, 2024, Plaintiffs, individually and on behalf of all others similarly situated, filed a Class Action Complaint against RD in Case No. 24CV002048 (“Class Action”).

The gravamen of both complaints is that Plaintiffs (and certain similarly situated employees of Defendant and other aggrieved persons) have been injured as a result of Defendants’ failure to pay Plaintiffs, the class members, and other aggrieved persons for all hours worked and/or failure to pay them at the appropriate minimum, regular, and overtime rates. The PAGA Action asserts a single cause of action for Civil Penalties Under PAGA. The Class Action asserts eight claims for violation of various provisions of the Labor Code, and a claim for Unfair Business Practices in violation of Business & Professions Code section 17200.

2. Defendant’s Motions to Compel Arbitration and Prior Proceedings/Orders Thereon

In both matters, Defendant moved, pursuant to the Federal Arbitration Act (“FAA”) (9 U.S.C. §§ 2, 4) and the California Arbitration Act (“CAA”) (Code of Civil Procedure §§ 1281.2, 1281.4),1 for an order compelling Plaintiffs to arbitrate their claims on an individual basis pursuant to the terms of a valid and enforceable arbitration agreement, dismiss their class claims, and stay the actions pending completion of the individual arbitration.

In the Class Action, the motion originally came on for hearing on March 5, 2026. In the PAGA Action, the motion originally came on for hearing on March 20, 2026. In both the March 5 and 20 Minute Orders, the Court issued a partial ruling finding that (1) Defendant met its burden to show that an Arbitration Agreement exists between each Plaintiff, on the one hand, and Defendant, on the other hand, and (2) the Arbitration Agreements cover: (a) all of Plaintiffs’ claims in the Class Action, except the class claims, and (b) Plaintiffs’ “individual” PAGA claim in the PAGA Action. (See 3/5/26 Minute Order (Class Action), p. 1; 3/20/26 Minute Order (PAGA Action), p. 2.) A full analysis leading to these rulings, including rulings on evidentiary objections, is contained within the 3/5/26 Minute Order in the Class Action, which is hereby incorporated by reference.

After its partial ruling, the Court noted that the burden, therefore, shifts to Plaintiffs to prove any defenses to the validity and enforceability of the Arbitration Agreements. (See 3/5/26 Minute Order (Class Action), p. 4; 3/20/26 Minute Order (PAGA Action), pp. 2-3.) The Court stated, however, that it elected to defer ruling on Plaintiffs’ defenses until the United States Supreme Court had issued its decision in Flowers Food, Inc., et al. v. Angelo Brock 146 S.Ct. 327 (2025), granting cert. to Brock v. Flowers Food (10th Cir. 2024) 121 F.4th 753, aff’g 673 F. 1 All subsequent statutory references are to the Code of Civil Procedure unless otherwise specified.

Supp. 3d 1180 (D. Colo 2023) [denying motion to compel arbitration and finding that plaintiffs fell within the class of workers engaged in interstate commerce] (Flowers Food). (See 3/5/26 Minute Order (Class Action), p. 1; 3/20/26 Minute Order (PAGA Action), p. 1.) The Court reasoned that the deference was based on the parties’ requests and the interest of judicial economy, given that Flowers Food was set to resolve an issue on one of the same defenses raised by Plaintiffs, which resolution would also impact the other defenses raised by Plaintiffs. (See 3/5/26 Minute Order (Class Action), pp. 1, 5-6; 3/20/26 Minute Order (PAGA Action), p. 2.)

3. Supplemental Briefs Following the United States Supreme Court’s Decision in Flowers Food

The United States Supreme Court issued its decision in Flowers Food on May 28, 2026. (See Flowers Food (2026) 146 S.Ct. 1358.) Pursuant to this Court’s order on July 15, 2026, the parties’ filed, on July 29, 2026, supplemental briefs in support of, and in opposition to, Defendant’s motions to compel arbitration.

By Minute Order dated August 12, 2026, the Court stated that “[i]t appears the Court now has everything before it to issue a substantive ruling on the motions to compel arbitration [in both matters],” and that the motions would be heard on August 28, 2026 “based on the parties original briefing, as well as the [July 29, 2026] supplemental briefing.” (8/12/26 Minute Orders.)

The Court now issues its ruling on the previously deferred portion of the motions— specifically, Plaintiffs’ defenses to the enforcement of the arbitration agreements. The Court finds it reasonable to issue a single ruling applicable to both motions because (1) the parties’ briefs, evidence (including respective Arbitration Agreements), and evidentiary objections filed with their original moving, opposing, and reply papers in both the PAGA Action and Class Action are substantially identical, and (2) the parties’ July 29, 2026 supplemental briefs were filed only in the PAGA Action, demonstrating the parties’ intent for the same arguments to be applied equally to both motions.

B. PLAINTIFFS’ DEFENSES TO THE ENFORCEMENT OF THE ARBITRATION AGREEMENTS

The party opposing a motion to compel arbitration (here, Plaintiffs) bears the burden of producing evidence of and proving (by a preponderance) any fact necessary to any defense raised. (Rosenthal v. Great Western Financial Sec. Corp. (1996) 14 Cal.4th 394, 413.)

Plaintiffs argue that they are not required to arbitrate their wage and hour causes of action because: (1) they are exempt from FAA coverage by their status as transportation workers under 9 U.S.C. § 1, (2) Labor Code sections 229 and 432.6 therefore apply, which sections prohibit agreements to arbitration claims for unpaid wages, (3) Defendant waived its right to arbitrate, and (4) the Arbitration Agreements are unconscionable. (See generally PAGA Action Opp. and Class Action Opp.)

The Court discusses each of Plaintiffs’ defenses below, and ultimately concludes that the Arbitration Agreements are unconscionable and not subject to severance.

1. The FAA does not Apply Because Plaintiffs are Exempt under the Interstate Commerce Exemption

a. Legal Framework for the Interstate Commerce Exemption

Section 1 of the FAA provides a limited exemption from FAA coverage to “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.” (9 U.S.C., § 1. Emphasis added.)

The Supreme Court has established that the focus for determining whether local delivery drivers, such as Plaintiffs here, fall within the FAA’s transportation worker exemption is on the performance of the work that the employee does, not what the employer does generally or the industry of the employer. (Sw. Airlines Co. v. Saxon (2022) 596 U.S. 450, 456 [holding that an airline ramp supervisor was engaged in foreign or interstate commerce because her work frequently required her to load and unload baggage, airmail, and commercial cargo on and off airplanes that traveled across the country]; Bissonnette v.

LePage Bakeries Park St., LLC (2024) 601 U.S. 246, 253.) “[A] transportation worker is one who is ‘actively’ ‘engaged in transportation of ... goods across borders via the channels of foreign or interstate commerce.” (Bissonnette, supra, 601 U.S. at 256, quoting Saxon, supra, 596 U.S. at 458.) “In other words, any exempt worker ‘must at least play a direct and ‘necessary role in the free flow of goods’ across borders.’” (Ibid.)

Most recently, the Supreme Court has held that “a worker who transports goods on an intrastate leg of an interstate journey” can qualify for the FAA exemption, and “[n]othing in [section 1 of the FAA] requires an individual to cross state lines or interact with a vehicle that does.” (Flowers Food, supra, 146 S.Ct. at 1363-1364; see id., at 1366 [rejecting the defendant’s request “to adopt a bright-line rule that an individual can never qualify for § 1’s exemption unless he crosses state lines or interacts with vehicles that do”].) Flowers Food reaffirms that an individual is engaged in interstate commerce so long as s/he “played a direct, active, and necessary part in ensuring the [product] got from a point in [one state] to a point in [another state].” (Id., at 1364-65.)

b. Application of the Legal Framework to Plaintiffs

Defendant argues that Plaintiffs do not fall within the transportation exemption because Plaintiffs failed to present sufficient evidence that the packages they delivered originated from out of state or were part of an interstate journey. (See Def. Suppl. Br., 1:7-9, 2:8-9.) Specifically, Defendant argues:

Plaintiff Chavez’s declaration does not set forth any evidence that any packages he delivered were involved in interstate commerce. Plaintiff Mendoza only contends that he saw some delivery trucks with out-of-state license plates, which is insufficient. (See Mendoza Decl., ¶ 5.) Plaintiffs do not present any evidence regarding where the packages originated nor do they provide any indication that the

packages they delivered ever crossed state lines. It is squarely Plaintiffs’ burden to prove up their contract defense, and barely- there details relating to his actual job duties or relating to where any packages came from or went is insufficient for this Court to rule Plaintiff is exempt from the FAA. There is simply no evidence before this Court establishing the essential factual predicate required by Flowers Foods namely, that Plaintiffs’ deliveries constituted an ‘intrastate leg of an interstate journey.’

(Id., 2:9-18; see also Class Action Mem., 4:18-5:24, citing Saxon, supra, 596 U.S. at 456; Bissonnette, supra, 601 U.S. at 247; Lopez v. Cintas Corp. (5th Cir. 2022) 47 F.4th 428, 4312; PAGA Action Mem., 4:14-5:19 [same].)

A similar argument was made before the Court of Appeals in Betancourt v. Transp. Brokerage Specialists, Inc. (2021) 62 Cal.App.5th 552, 560-61. There, the defendant argued that “the interstate nature of the goods delivered by plaintiff was based on ‘unfounded conjecture and speculation.’” (Id. at 560.) The Court of Appeal disagreed and found the following evidence sufficient to show that the plaintiff’s leg of the journey was part of an interstate journey: (1) Defendant testified that (a) Amazon accounted for 99.5-100% of its overall business, (b) its drivers did “last-mile delivery” for Amazon, which he defined as “the last stop of a retail transaction,” (c) its drivers would go out to Amazon’s “giant warehouses,” load their vans with packages, and then deliver them to Amazon customers, (d) its drivers were “doing the deliveries to the end person, the retail last mile”; (2) Plaintiff similarly attested that (a) his primary job duties were picking up packages from Amazon warehouses and delivering them to Amazon customers and (b) “[b]ased on [his] personal observations, the packages could have originated from anywhere in the United States or even foreign countries”; (3) in 2017, Amazon was already shipping more than five billion items worldwide; and (4) nothing in the record suggested that the Amazon goods delivered by plaintiff originated only in California, such that he was making purely intrastate deliveries. (Id., at 560-61.)

In other words, the fact that defendant’s drivers did last-mile delivery for a well-known worldwide shipping company, Amazon, as the majority of their work, and the absence of anything suggesting that the Amazon goods originated only in California, was sufficient to show that the plaintiff was exempt from FAA coverage as a transportation worker engaged in interstate commerce under section 1 of the FAA.

Betancourt further found that its conclusion was consistent with a Ninth Circuit federal case which also involved Amazon last-mile delivery drivers and the FAA exemption: Rittmann v. Amazon.com, Inc. (9th Cir. 2020) 971 F.3d 904.) As Betancourt notes, the Ninth Circuit in Rittmann explained that “Amazon packages do not ‘come to rest,’ at Amazon warehouses, and thus the interstate transactions do not conclude at those warehouses. The packages are not held at warehouses for later sales to local retailers; they are simply part of a process by which a delivery

2 Defendant’s Reply takes issue with Plaintiffs’ Oppositions failing to address Lopez. Notably, however, the Flowers Food district court’s decision that was affirmed by the Court of Appeal and Supreme Court expressly declined to follow Lopez. (See 121 F.4th 753, 769 (10th Cir. Nov. 12, 2024).) Thus, Lopez’s value, which is at most persuasive coming from the Fifth Circuit, is questionable.

provider transfers the packages to a different vehicle for the last mile of the packages’ interstate journeys. The interstate transactions between Amazon and the customer do not conclude until the packages reach their intended destinations, and thus [defendant’s] drivers are engaged in the movement of interstate commerce.” (Rittman, supra, 971 F.3d at 916.) Thus, Rittmann concluded that Amazon last-mile delivery drivers are “engaged in interstate commerce” because their “transportation of goods wholly within a state are still a part of a continuous interstate transportation, reasoning that “the Amazon packages they carry are goods that remain in the stream of interstate commerce until they are delivered.” (Id. at 915-16.)

Here, there does not appear to be a factual dispute as to the scope of Defendant’s business as a whole or the work that Plaintiffs performed for Defendant: Defendant contracts with Amazon to provide delivery services on behalf of Amazon through Amazon’s Delivery Service Partner program, and hires drivers to deliver packages to Amazon customers who order products on Amazon’s website. (Declaration of Ronnie Henry (“Henry Decl.”) ¶ 2; see also Class Action Opp., 16:27-17:12; PAGA Action Opp., 18:6-19.)

The drivers pick up packages at Amazon warehouses in California and deliver them locally. (Henry Decl., ¶ 2.) When the drivers pick up packages from Amazon warehouses, they are already unloaded and waiting. (Ibid.) “RD is not involved in the logistics of any packages crossing borders, nor does it facilitate customers ordering packages from Amazon.” (Id.) Plaintiffs worked as delivery drivers for Defendant in 2022 and 2023, making local-only deliveries in California for its clients. (Id., ¶¶ 2-3.)

The Court’s review of Defendant’s Employee Handbook, attached as Exhibit 5 to the Henry Decl., suggests that the majority of work performed by Defendant’s drivers involves Amazon, as it appears to be the only “client” specifically referenced therein and is, in fact, referenced in relation to Defendant’s applicable policies no less than 60 times. (See generally Henry Decl., Exh. 5.) Moreover, as the Henry Decl. describes, several steps of RD’s onboarding process involve recognition of Defendant’s and the employee’s work with Amazon. (Henry Decl., ¶¶ 5-6.)

Additionally, Plaintiff Mendoza attests that: “[He] would pick up packages from a warehouse in California, but [he] recall[s] seeing out of state license plates on the semi-trucks that would deliver the packages at the warehouse for distribution.” (Declaration of Mendoza (“Mendoza Decl.”), ¶ 5.) Moreover, there is nothing in the record which suggests that the Amazon goods delivered by Plaintiffs originated only in California, such that they were making purely intrastate deliveries. Finally, it seems uncontroversial to suggest that Amazon’s worldwide shipping presence has not decreased since 2017, and has more than likely increased as of 2022 and 2023 when Plaintiffs were employed by Defendant.

The Court finds that the foregoing is sufficient to show that Plaintiffs are exempt from FAA coverage as transportation workers engaged in interstate commerce under section 1 of the FAA. Thus, Plaintiffs’ defenses to the enforceability of the Arbitration Agreements must be analyzed under California Law (including the CAA), not the FAA.

2. Labor Code sections 229 and 432.6 do not Prohibit Enforcement of the Arbitration Agreements

Plaintiffs argue that Labor Code sections (“LC”) 229 and 432.6, subdivision (a), prohibit the mandatory arbitration of Plaintiffs’ unpaid wage claims.

LC 229 provides an exception under California law to the general rule favoring arbitrability. The statute states that actions to collect “due and unpaid wages claimed by an individual may be maintained without regard to the existence of any private agreement to arbitrate.” (LC 299.)

LC 432.6, subdivision (a) provides in pertinent part:

A person shall not, as a condition of employment, continued employment, or the receipt of any employment-related benefit, require any applicant for employment or any employee to waive any right, forum, or procedure for a violation of any provision of the California Fair Employment and Housing Act (Part 2.8 (commencing with Section 12900) of Division 3 of Title 2 of the Government Code) or this code, including the right to file and pursue a civil action....

Plaintiffs’ argument on these points is extremely brief and conclusory. (See Class Action Opp., 14:25-15:10; PAGA Action Opp., 16:6-16.) Moreover, Plaintiffs’ argument only addresses the claims asserted in their Class Action. Specifically, Plaintiffs only argue that “[t]his is a putative class action alleging wage-and-hour violations by Defendant (failure to pay all wages, noncompliant meal and rest periods, deficient earnings statements, etc.), brought under the Labor Code, and therefore it falls squarely within the provisions of both sections 229 and 432.6.” (Class Action Opp., 15:7-9; PAGA Action Opp., 16:14-16.)

Defendant disputes the applicability of both LC 229 and 432.6.

With respect to LC 229, Defendant argues that Lane v. Francis Cap. Mgmt. LLC (2014) 224 Cal.App.4th 676, 684 clarified that LC 229 is, by its express terms, only applicable to causes of action made under LC 200 through 244. (Class Action Mem., 6:23-7:3; PAGA Action Mem., 6:18-25; Def. Suppl. Br., 6:4-7:4.) Lane further held that certain violations of LC 200 through 244 do not fall under LC 229; specifically, failure to provide mandated meal or rest breaks under LC 226.7, waiting time penalties under LC 201-203, and failure to provide itemized wage statements under LC 226. (See Lane, supra, 224 Cal.App.4th at 684.)

Defendant is correct that, under Lane, none of Plaintiffs’ causes of action are subject to LC 229 because there is not one that solely relies on LC 200 through 244 and/or because they assert claims under LC 200 through 244 which Lane expressly held do not fall under LC 229.

To be sure, the PAGA Action asserts a single cause of action under LC 2698 et seq., and the Class Action asserts eight causes of action for violations of the LC; namely LC 204, 1194, 1194.2, 1197, and 1197.1 (First Cause of Action for Failure to Pay Minimum and Straight Time Wages for All Hours Worked), LC 1194 and 1198 (Second Cause of Action for Failure to Pay Overtime Wages), LC 226.7 and 512 (Third Cause of Action for Failure to Provide Meal

Periods), LC 226.7 (Fourth Cause of Action for Failure to Authorize and Permit Rest Periods), LC 201-203 (Fifth Cause of Action for Failure to Pay Wages of Discharged Employees – Waiting Time Penalties), LC 226 (Sixth Cause of Action for Failure to Provide and Maintain Accurate and Compliant Wage Records), LC 2802 (Seventh Cause of Action for Failure to Indemnify Employees for Expenditures), and LC 226 and 1198.5 (Eighth Cause of Action for Failure to Produce Requested Employment Records). The Ninth Cause of Action is asserted under Business & Professions Code section 17200 and is premised upon the several LC violations asserted through the First through Eighth Causes of Action.

With respect to LC 432.6, Defendant argues that, while the statute penalizes an employer who requires an employee or applicant for employment to enter into an arbitration agreement as a condition for being hired or for keeping a job, the penalty is not that the arbitration agreement is rendered unenforceable. (Def. Suppl. Br., 7:10-27, citing Chamber of Commerce v. Bonta (9th Cir. 2023) 62 F.4th 473, 480.) Rather, the penalty is of a criminal nature, as provided under LC 433 that an employer who violates LC432.6 has committed a misdemeanor.

Legislative reports appear to confirm that a violation of LC 432.6 is a criminal penalty and “does not affect the enforceability of the resultant agreement to arbitrate.” (Bonta, supra, 62 F.4th at 480.) Bonta notes that “[t]his resulted in the oddity that an employer subject to criminal prosecution for requiring an employee to enter into an arbitration agreement could nevertheless enforce that agreement once it was executed.” (Ibid.)

Thus, even assuming arguendo Defendant violated LC 432.6 by requiring Plaintiffs to execute the Arbitration Agreements as a condition of employment, that violation would not affect the enforceability of the Arbitration Agreement. As Defendant states, Plaintiffs provide no authority which applies LC 432.6 as a contract defense. (Def. Suppl. Br., 7:19-21.) As noted, Plaintiffs’ argument as to LC 432.6 is minimal.

Based on the foregoing, neither LC 229 nor LC 432.6 prohibit the enforcement of the Arbitration Agreements.

3. Defendant has not Waived the Right to Arbitrate the Dispute

Through the Oppositions, Plaintiffs argue that Defendant waived its right to compel arbitration. (Class Action Opp., 6:8-8:4; PAGA Action Opp., 7:17-9:11.) The Court disagrees.

“On petition of a party to an arbitration agreement ... the court shall order the petitioner and the respondent to arbitrate the controversy ... unless it determines that ... [t]he right to compel arbitration has been waived by the petitioner ....” (§ 1281.2, subd. (a).) As the California Supreme Court has made clear, the catch-all category called “waiver” actually consists of at least four distinct legal defenses to the enforcement of an agreement to arbitrate. As discussed in Platt Pacific, Inc. v.

Andelson (1993) 6 Cal.4th 307 (Platt Pacific), “[g]enerally, ‘waiver’ denotes the voluntary relinquishment of a known right. But it can also mean the loss of an opportunity or a right as a result of a party’s failure to perform an act it is required to perform, regardless of the party’s intent to abandon or relinquish the right.” (Id. at 315.) The Platt Pacific Court noted that one line of case law discusses “that a party may ‘waive’ its right to arbitrate by failing to timely demand arbitration.

We conclude that those decisions use the word ‘waiver’ in the sense of the

loss or forfeiture of a right resulting from failure to perform a required act.” (Id. at 315.) The Court discussed another line of cases addressing the question, “whether a party has abandoned its right to arbitration by conduct inconsistent with the exercise of the right” and noted that this question “is altogether different from the question of whether a condition precedent to the contractual right to arbitrate has occurred or has been legally excused.” (Id. at 318.)

The Court further elucidated this area of law in Quach v. California Commerce Club, Inc. (2024) 16 Cal.5th 562, 583. There, the Court held that “[i]n determining whether a party to an arbitration agreement has lost the right to arbitrate by litigating the dispute, a court should treat the arbitration agreement as it would any other contract, without applying any special rules based on a policy favoring arbitration. That is, courts should apply the same procedural rules that they would apply to any other contract.” (Quach, supra, 16 Cal.5th at 583.) “[U]nder California law, a party may, as a result of its litigation conduct, lose its right to compel arbitration on various grounds” including estoppel, forfeiture, and timeliness. (Ibid.)

“To establish waiver under generally applicable contract law, the party opposing enforcement of a contractual agreement must prove by clear and convincing evidence that the waiving party knew of the contractual right and intentionally relinquished or abandoned it.” (Id., at 584.)

Plaintiffs argue that Defendant knew of the contractual right, as evidenced by Defendant’s Answers, filed December 18, 2023 (PAGA Action) and March 10, 2025 (Class Action). Plaintiffs argue that Defendant intentionally relinquished or abandoned that right by waiting until January 28, 2026 (Class Action) and February 24, 2026 (PAGA Action) before moving to compel arbitration. Plaintiffs show that these dates, on which Defendant moved to compel arbitration, were four and five months, respectively, after the parties attended mediation on September 24, 2025.

Notably, despite the fact that Defendant’s motions to compel arbitration were filed almost 10 months, and more than two years, respectively, after Defendant filed its Answers in the Class Action and PAGA Action, Plaintiffs’ waiver argument is not based on that delay. Nor is Plaintiffs’ waiver argument based on an assertion that Defendant actively litigated the case prior to moving to compel arbitration. Plaintiffs do not assert, or show, that Defendant took affirmative action inconsistent with its right to compel arbitration prior to moving for such relief.

The fact that a party engages in a mediation prior to moving for arbitration, on its own, does not strike the Court as intentionally relinquishing or abandoning the right to compel arbitration. If a dispute can be resolved via mediation, it seems reasonable to avoid the cost of motion practice until after mediation efforts are exhausted. Furthermore, the four- to five-month delay between the conclusion of mediation and the instant motions being filed, without more, does not strike the court as intentional relinquishment. (See Hoover v.

American Income Life Ins. Co. (2012) 206 Cal.App.4th 1193, 1204 [“There is no fixed stage in a lawsuit beyond which further litigation waives the right to arbitrate.”].)

Moreover, Defendant shows that it has consistently asserted its right to arbitration in its filing with the Court and in its representations with Plaintiffs, that it has not served or responded to any discovery, there is no trial date set, and Defendant has not filed a counterclaim or taken

advantage of judicial procedures that are not available in arbitration. (Declaration of Brett Overby (“Overby Decl.”), ¶¶ 3-9.)

Based on the foregoing, Plaintiffs have not established “by clear and convincing evidence that [Defendant] knew of the contractual right and intentionally relinquished or abandoned it.” (Quach, supra, 16 Cal.5th at 584.)

4. The Court finds the Arbitration Agreements Unconscionable

“A contract is unconscionable if one of the parties lacked a meaningful choice in deciding whether to agree and the contract contains terms that are unreasonably favorable to the other party.” (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 125 (OTO).) Thus, the doctrine of unconscionability has both a procedural and a substantive element. (Ibid.) “‘The procedural element addresses the circumstances of contract negotiation and formation, focusing on oppression or surprise due to unequal bargaining power. [Citations.] Substantive unconscionability pertains to the fairness of an agreement’s actual terms and to assessments of whether they are overly harsh or one-sided.’ [Citation.]” (Ibid.)

“‘The prevailing view is that [procedural and substantive unconscionability] must both be present in order for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability.’ (Citation.) But they need not be present in the same degree. ‘Essentially a sliding scale is invoked which disregards the regularity of the procedural process of the contract formation, that creates the terms, in proportion to the greater harshness or unreasonableness of the substantive terms themselves.’ (Citation.)

In other words, the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.” (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114 abrogated on other grounds by AT&T Mobility LLC v. Concepcion (2010) 563 U.S. 333, [131 S.Ct. 1740, 179 L.Ed.2d 742].)

The defense is “inherently fact specific.” (OTO, supra, 8 Cal.5th at 138.) “The burden of proving unconscionability rests upon the party asserting it.” (Id. at 126.) Under the FAA, unconscionability claims are to be resolved by the trial court before enforcing an arbitration agreement. (Id. at 138.)

a. The Circumstances of the Arbitration Agreement’s Formation Created Oppression

For procedural unconscionability, the “pertinent question” is “whether circumstances of the contract’s formation created such oppression or surprise that closer scrutiny of its overall fairness is required.” (OTO, supra, 8 Cal.5th at 126.) “Oppression occurs where a contract involves lack of negotiation and meaningful choice, surprise where the allegedly unconscionable provision is hidden within a prolix printed form.” (Ibid.) “‘The circumstances relevant to establishing oppression include, but are not limited to (1) the amount of time the party is given to consider the proposed contract; (2) the amount and type of pressure exerted on the party to sign the proposed contract; (3) the length of the proposed contract and the length and complexity of

the challenged provision; (4) the education and experience of the party; and (5) whether the party’s review of the proposed contract was aided by an attorney.’” (Id. at 126-127 quoting Grand Prospect Partners, L.P. v. Ross Dress for Less, Inc. (2015) 232 Cal.App.4th 1332, 1348.)

The Court finds that the circumstances relating to the creation of the Arbitration Agreements weigh in favor of a finding of oppression as to the majority of the foregoing categories.

The only category which weighs against a finding of oppression is “the amount of time the party is given to consider the proposed contract,” as the Henry Decl. shows that potential new employees are given “as much time as they wish for reviewing the terms of the Agreement. For example, he or she could review the Agreement on one day, then return to the application on another day, and click to accept the Agreement at that time.” (Henry Decl., ¶ 16.)

It appears uncontested that Plaintiffs were required to sign the Arbitration Agreements as a condition of their employments, that Defendant drafted the Arbitration Agreements, and that Plaintiffs were given no opportunity to negotiate the terms governing arbitration of any dispute. Plaintiffs argue as much in Opposition. (Class Action Opp., 9:1-7.) While they do not cite to or set forth evidence through their declarations directly in support of that argument, the onboarding process set forth in the Henry Decl. supports Plaintiffs’ argument. Moreover, Defendant does not meaningfully address the argument in its Reply or Supplemental Brief. (See Class Action Reply, 8:25-26; PAGA Action Reply, 8:17-18.) Nor does Defendant offer evidence to counter Plaintiffs’ contentions as to the adhesive nature.

The nature of the provisions and the required format for review renders the Arbitration Agreement significantly complex. The detailed provisions relating to the scope of the agreement, the types of claims omitted therefrom, the arbitration process, the waiver of class and representative actions are, by their nature, highly complex. (See id., Exhs. 1-2.) According to the Henry Decl, a reader is required to review the Agreement on a mobile device. (See Henry Decl., ¶ 10) A reader, reviewing the Agreement by scrolling through the provisions on a mobile device, is only able to view one to one-and-a-half paragraphs of the full document at a time (as evidenced in Henry Decl., ¶ 14), rendering the Agreement unnecessarily complex.

It appears uncontroversial to suggest that Defendant is a more sophisticated actor, in terms of education (formal and informal) and experience, as it relates to the subject matters of the Arbitration Agreement. Moreover, the only reasonable inference from the facts set forth in Plaintiffs’ declaration in connection with their review and execution of the on-boarding documents is that neither’s review of the Agreement was aided by an attorney.

Plaintiffs further present evidence that their understanding of English is limited and that the Arbitration Agreements were presented to them only in English. (See Declaration of Chavez (“Chavez Decl.”), ¶¶ 4, 7; Mendoza Decl. at ¶¶ 3, 8.) This is consistent with the fact that the only version of the Arbitration Agreements presented to the Court by Defendant are in English.

Defendant argues that Plaintiffs’ limited English comprehension does not excuse them from arbitrating their claims. (See Class Action Reply, 6:1-7:12, citing Rosenthal, supra, 14

Cal.4th at 431; PAGA Action Reply, 5:19-7:3 [same].) Moreover, Defendant presents evidence showing that, based on Mr. Henry’s regular interactions with Plaintiffs, they spoke English in a proficient manner during their entire employment, and that he never knew Plaintiffs could not proficiently read or speak English. (Reply Declaration of Ronnie Henry (“Henry Reply Decl.”), ¶¶ 2-6.) Plaintiffs do not address this argument or evidence in their Supplemental Brief.

Even assuming arguendo Plaintiffs failed to show that their understanding of English was limited, the Court finds that Plaintiffs have separately shown that the majority of the OTO factors relevant to establishing oppression weigh in favor of a finding of oppression.

The Court finds from the foregoing that the circumstances of the Arbitration Agreement’s formation warrant close scrutiny of the fairness of its substantive terms.

b. Plaintiffs Show That the Arbitration Agreement’s Terms are Overly Harsh or Unreasonably Favorable to Defendant

“Substantive unconscionability pertains to the fairness of an agreement’s actual terms and to assessments of whether they are overly harsh or one-sided.” (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 246.) “To reiterate, we assess unconscionability with a sliding scale approach. [Citation.] In light of the high degree of procedural unconscionability, even a low degree of substantive unconscionability could render the arbitration agreement unconscionable.” (Carmona v.

Lincoln Millennium Car Wash, Inc. (2014) 226 Cal.App.4th 74, 85.) “Given the lack of choice and the potential disadvantages that even a fair arbitration system can harbor for employees, we must be particularly attuned to claims that employers with superior bargaining power have imposed one-sided, substantively unconscionable terms as part of an arbitration agreement. (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 115.)

Relying on the holding in Cook v. Univ. of So. Cal. (2024) 102 Cal.App.5th 312, Plaintiffs argue that three aspects of the Arbitration Agreements are substantively unconscionable: (1) the breadth of its scope; (2) its duration; and (3) its requirement that Plaintiffs arbitrate claims he has against Defendant-related third parties but does not require those third parties to arbitrate claims against Plaintiffs. Plaintiffs further argue that that the wholesale PAGA waiver and class action waiver render the Arbitration Agreements substantively unconscionable. The Court agrees.

Cook involved “an arbitration agreement of infinite duration [that] requires an employee to arbitrate all claims against the employer, its agents, affiliates, and employees irrespective of whether they arise from the employment relationship.” (Cook, supra, 102 Cal.App.5th at 316.) The Cook court affirmed the trial court’s denial of Defendant University of Southern California’s (USC) motion to compel arbitration on grounds that the arbitration award at issue was unconscionable. The holding in Cook was explicitly based on that arbitration agreement’s unlimited scope. “By its express terms, the agreement requires the arbitration of ‘all claims, whether or not arising out of Employee’s University employment, remuneration or termination, that Employee may have against the University or any of its related entities, including but not limited to faculty practice plans, or its or their officers, trustees, administrators, employees or

agents, in their capacity as such or otherwise; and all claims that the University may have against Employee.’ The plain language of the agreement requires Cook to arbitrate claims that are unrelated to her employment with USC.” (Cook, supra, 102 Cal.App.5th at 321.)

Here, the scope of the Arbitration Agreements cover claims against Defendant unrelated to the employment relationship. (Class Action Henry Decl., Exhs. 1-2, p. 1.) Specifically, the Arbitration Agreement “covers all past, current, and future grievances, disputes, claims, issues, or causes of action (collectively, ‘claims’) ... arising out of or relating to (a) Employee’s application, hiring, hours worked, services provided, and/or employment with the Company or the termination thereof, and/or (b) a Company policy or practice, or the Company’s relationship with or to a customer, vendor, or third party, including without limitation claims Employee may have against the Company and/or any Covered Parties (defined below), or that the Company may have against Employee.” (Ibid.

Emphasis added.) “‘Covered Parties’ means the Company, any entity formerly or currently owned, affiliated, controlled or operated by the Company (a ‘company entity’), clients of the Company or a company entity, and the former and current officers, directors, managers, employees, owners, attorneys, agents, and vendors of the Company and/or a company entity and/or clients of the Company.” (Id.) The plain language of the Agreement requires Plaintiffs to arbitrate claims that are potentially unrelated to their employment with Defendant.

Although Defendant blanketly states that “the Agreement is not infinite in scope” (see Class Action Reply, 9:16; PAGA Action Reply, 9:6), Defendant does not meaningfully dispute that the above language in the Agreement requires Plaintiffs to arbitrate claims unrelated to their employment with Defendant. Rather, Defendant only argues that the focus of the Agreement is on claims relating to or arising out of Plaintiff’s employment, and the inclusion of the challenged language is distinguishable from Cook because “Defendant is not a large university system and the likelihood that a dispute unrelated to Plaintiff’s employment would occur is too remote to demonstrate substantive unconscionability.” (Id., 9:27-10:4.) Perhaps; however, the potential is there nonetheless.

The holding in Cook was further based on the arbitration agreement’s infinite duration and requirements for termination, which indicated the parties did not contemplate termination at will after a reasonable time. “The trial court also found the arbitration agreement was unconscionable because it survived indefinitely following Cook’s termination from USC. The agreement expressly states that it ‘shall survive the termination of Employee’s employment, and may only be revoked or modified in a written document that expressly refers to the “Agreement to Arbitrate Claims” and is signed by the President of the University.’” (Cook, supra, 102 Cal.App.5th at 325.)

Here, Plaintiffs point to the provision in the Arbitration Agreement which states: “This Agreement to arbitrate shall survive the termination of Employee’s employment.” (Henry Opp., Exhs. 1-2, p. 3.) While this provision implies an infinite duration, there are no express or implied terms governing termination, like those in Cook, to indicate that the Agreement would not terminate at will after a reasonable time. Thus, the concern at issue in Cook is not at issue to the same extent with this provision. However, the fact that the Arbitration Agreement expressly

states it survives the termination of Plaintiffs’ employments undermines Defendant’s contention that the focus of the Agreements is on claims relating to or arising out of Plaintiff’s employment.

The Cook court’s finding of a lack of mutuality arising from the inclusion of third-party beneficiaries was specifically related to the overbroad duration and scope of the arbitration agreement. “No explanation is offered as to why Cook should be required to give up the ability to ever bring claims in court against a USC employee that are unrelated to USC or her employment there. (Cook, supra at p. 327. Italics added.) “The concern here is not that the arbitration agreement provides ancillary benefits to third parties. The concern is that the agreement provides benefits to broad swaths of third party beneficiaries only in favor of USC without any showing of justification for this one-sided treatment.” (Id. at 326-27. Emphasis added.)

Because the scope of the Arbitration Agreement here is not limited to claims arising out of the employment relationship, and because it contemplates an infinite duration (albeit presumably subject to termination at will after a reasonable time), it creates the one-sided advantage to the employer and its affiliates present in Cook. Moreover, the categories of third parties benefitting from the Arbitration Agreements exceed those at issue in Cook. Here, the Arbitration Agreement requires Plaintiffs to not only arbitrate claims against Defendant-related third parties, but also clients and vendors of Defendant.

Defendant does not dispute Plaintiffs’ contention that this language in the Arbitration Agreement lacks mutuality. Rather, Defendant argues that “Defendant’s inclusion of other entities, agents, vendors and clients is justified given that it has an interest in claims brought by employees that are directly providing delivery services for those clients.” (Class Action Reply, 10:10-12; PAGA Action Reply, 9:27-10:1.) Defendant’s proffered justification for this one-sided treatment fails to support that the purpose of the provision—requiring only Plaintiffs to arbitrate those claims—serves the interests of all parties.

Therefore, it does not overcome Plaintiffs’ showing of lack of mutuality.

Plaintiffs next argue that the Arbitration Agreements contain an unlawful wholesale PAGA waiver. (Class Action Opp., 12:24-13:10; PAGA Action Opp., 14:3-17.) Plaintiffs point to the following clause of the Arbitration Agreements:

Each of the Employee and the Company expressly intends and agrees, to the absolute maximum extent permitted by law, that: ... (b) representative action procedures are hereby waived and shall not be asserted in arbitration or in court, nor will they apply in any arbitration pursuant to this Agreement; (c) each will not assert ... representative action claims against the other in arbitration or court or otherwise; and (d) the Employee and the Company shall only submit their own, individual claims in arbitration and will not seek to represent the interests of any other person. No arbitrator selected to arbitrate any claim covered by this Agreement is authorized to arbitrate any claim on a class, collective, consolidated, or representative basis.

(Henry Decl., Exhs. 1-2, p. 2.)

While Defendant’s Reply and Supplemental Brief do not address the PAGA waiver provision of the Arbitration Agreements, the Court notes that Defendant’s PAGA Action motion seeks to compel arbitration of Plaintiffs’ “individual” PAGA claim, under the assumption that the FAA applies. “In Viking River, the Supreme Court held the FAA ‘preempts the rule of Iskanian [v. CLS Transp. Los Angeles LLC (2014) 59 Cal.4th 348] insofar as it precludes division of PAGA actions into individual and non-individual claims through an agreement to arbitrate.” (PAGA Action Mem., 7:28-8:2, citing Viking River Cruises, Inc. v. Moriana (2022) 142 S.Ct. 1906, 1924-25.)

Because, as discussed at length above, the FAA does not apply, Defendant’s basis for attempting to construe the PAGA waiver in the Arbitration Agreement in a lawful manner under Viking River (i.e., splitting it between Plaintiffs’ “individual” PAGA claim and “non-individual” PAGA claim) fails. Rather, Iskanian governs. Iskanian holds that “an employee’s right to bring a PAGA action is unwaivable.” (See id., supra, 59 Cal.4th at 383.)

Moreover, even assuming arguendo the FAA (and therefore Viking River) applied, Defendant concedes that the Arbitration Agreements were executed by Plaintiffs on February 16, 2022 and April 20, 2022. The Viking River opinion was not issued until June 15, 2022. Prior to Viking River, there was no concept of “individual” versus “non-individual” PAGA representative actions. Thus, in attempting to glean the parties’ mutual understanding of the term at the time of contracting under the Arbitration Agreements, it is highly unlikely the parties’ intended the references to “representative action” in the waiver provision of the Arbitration Agreements to have any distinction between “individual” and “non-individual” representative actions.

Nor is there any language in the Arbitration Agreement that supports an argument that the term “representative” as used therein referred exclusively to an employee’s action asserting PAGA claims arising out of events involving other employees.

Furthermore, even in the context of an arbitration clause, and the preference for finding that arbitration provisions are valid and enforceable, the Court must construe ambiguities against the drafter. (See Victoria v. Super. Ct. (1985) 40 Cal.3d 734, 739.) Doing so, the Court finds that the parties’ agreement that “representative action procedures are hereby waived and shall not be asserted in arbitration or in court [and] each will not assert ... representative action claims against the other in arbitration or court” constitutes a wholesale PAGA waiver, and is therefore unenforceable. (See Iskanian, supra, 59 Cal.4th at 383.)

Finally, Plaintiffs argue that the Arbitration Agreements are unconscionable because they contain class action waivers. The Court notes that both parties first raised the issue of the class action waiver in their Supplemental Briefs. The Arbitration Agreement contains the following clause addressing class actions:

Each of the Employee and the Company expressly intends and agrees, to the absolute maximum extent permitted by law, that: (a) class action, collective action, or consolidated action procedures are hereby waived and shall not be asserted in arbitration or in court, nor will they apply in any arbitration pursuant to this Agreement; ...

(c) each will not assert class action, collective action, consolidated action or representative action claims against the other in arbitration or court or otherwise; and (d) the Employee and the Company shall only submit their own, individual claims in arbitration and will not seek to represent the interests of any other person. No arbitrator selected to arbitrate any claim covered by this Agreement is authorized to arbitrate any claim on a class, collective, consolidated, or representative basis.

(Henry Decl., Exhs. 1-2, p. 2.)

Plaintiffs argue that the class action waiver is unenforceable under California law. (See Pltf. Suppl. Br., 5:8-8:2, citing Civ. Code, § 1668; Gentry v. Sup. Ct. (2007) 42 Cal.4th 443, 453- 58.)

Defendant appears to recognize that the Arbitration Agreements contain a class action waiver. Moreover, Defendant concedes that, if the FAA does not apply, Gentry and its progeny govern the analysis of whether or not a class action waiver is enforceable. Defendant argues that Plaintiffs have failed to establish the four-factor test required under Gentry for invalidating a class waiver. (Def. Suppl. Br., 4:25-5:22.)

Under the Gentry test, courts must consider the following four factors when determining whether a class action waiver clause should be enforced: “the modest size of the potential individual recovery, the potential for retaliation against members of the class, the fact that absent members of the class may be ill informed about their rights, and other real world obstacles to the vindication of class members’ right to overtime pay through individual arbitration. If it concludes, based on these factors, that a class arbitration is likely to be a significantly more effective practical means of vindicating the rights of the affected employees than individual litigation or arbitration, and finds that the disallowance of the class action will likely lead to a less comprehensive enforcement of overtime laws for the employees alleged to be affected by the employer's violations, it must invalidate the class arbitration waiver to ensure that these employees can ‘vindicate [their] unwaivable rights in an arbitration forum.’” (Gentry, supra, 42 Cal.4th at 463.)

Here, application of the Gentry test weighs in favor of invalidating the class action waiver. It is fair to say that each Plaintiff’s potential recovery is modest, based on their showing that they each worked for Defendant for only one, and one-and-a-half years, respectively, at hourly rates ranging from $19.50 to $22.75. (Suppl. Chavez Decl., ¶ 2; Suppl. Mendoza Decl., ¶¶ 2-3.) Moreover, Plaintiffs attest to facts which indicate the potential for retaliation, that absent members of the class may be ill informed about their rights, and that other real world obstacles exist to the vindication of class members’ rights asserted in the complaints. (See Suppl. Chavez Decl., ¶¶ 3-5; Suppl. Mendoza Decl., ¶¶ 4-8.)

Thus, the Court concludes, based on these factors, that a class arbitration is likely to be a significantly more effective practical means of vindicating the rights of the affected employees than individual litigation or arbitration, and finds that the disallowance of the class action will

likely lead to a less comprehensive enforcement of overtime laws for the employees alleged to be affected by the employer’s violations. Therefore, the class action waiver is invalid.

c. Severance

The Agreement contains a severability clause that provides:

If any provision of this Agreement to arbitrate is adjudged to be void or otherwise unenforceable, in whole or in part, the void or unenforceable provision shall be severed and such adjudication shall not affect the validity of the remainder of this Agreement to arbitrate. The only exception is that this Agreement is not, and shall never be construed as, reformed to be, or enforced as if it were, an agreement to arbitrate claims on a class, collective, consolidated, or representative basis. Stated differently, under no circumstance will a claim be allowed to proceed in arbitration as a class action, collective action, consolidated action, or representative action.

(Henry Decl., Exhs. 1-2, p. 3.)

“An unconscionable contractual term may be severed and the resulting agreement enforced, unless the agreement is permeated by an unlawful purpose, or severance would require a court to augment the agreement with additional terms.” (Cook, supra, 102 Cal.App.5th at 329- 30.) “‘In deciding whether to sever terms rather than to preclude enforcement of the provision altogether, the overarching inquiry is whether the interests of justice would be furthered by severance; the strong preference is to sever unless the agreement is ‘permeated’ by unconscionability.’ [Citation.]” (Magno v. The College Network, Inc. (2016) 1 Cal.App.5th 277, 292.)

As discussed above, the Arbitration Agreements contain several offending provisions. The Court, in considering whether severance is possible without a rewriting of the terms, concludes that it is not. For example, the provisions violating Cook, discussed above, cannot be cured by simply striking them from the Arbitration Agreement. Rather, an effective severance while maintaining the core of the Agreement would require careful excising of the terms to ensure that the Agreement still read clearly and made sense in all respects.

In this way, the Court finds that the Arbitration Agreement is permeated by unconscionability. This conclusion is reinforced by the fact that it was drafted by Defendant. Moreover, the Cook court held that nonenforcement, rather than severance, was warranted where three of the five offending provisions established here were at issue there. (Cook, supra, 102 Cal.App.5th at 328-29.)

Based on the foregoing, the Court is unable to craft an approach to severance that would serve the interests of justice. (See Magno, supra, 1 Cal.App.5th at 292.)

C. CONCLUSION

Based on the foregoing, the Court finds that the Arbitration Agreements are unconscionable, and therefore unenforceable. For this reason, the Motion is DENIED.

25 Executive, LLC v. Julie Nguyen 25CV002614

[1] CROSS-DEFENDANTS’ DEMURRER TO, AND MOTION TO STRIKE PORTIONS OF, FIRST AMENDED CROSS-COMPLAINT

TENTATIVE RULING: The present demurrer and motion to strike are MOOT. The Court grants Ms. Nguyen five (5) Court days’ leave to file and serve the Second Amended Cross-Complaint filed as Attachment A to her August 10, 2026 Memorandum of Points and Authorities (“August 10 Proposed SACC”) with the Court. Cross-Defendants may respond to the August 10 Proposed SACC consistent with California law.

Ms. Nguyen is advised she must file the August 10 Proposed SACC in the form submitted to the Court on August 10, 2026 without modification. Moreover, moving forward, Ms. Nguyen must receive leave of Court before filing amendments to her pleadings.

Cross-Defendants 25 Executive, LLC, Jeremy Sill, Jesse Van Coutren, Michael Holcomb, and Strong & Hayden (“Cross-Defendants”) demur, pursuant to Code of Civil Procedure sections 430.10, subdivisions (e) and (f), 3 to the First Amended Cross-Complaint (“FACC”) of Julie Nguyen (“Nguyen”). Cross-Defendants further move, pursuant to Code of Civil Procedure sections 435 and 436, subdivision (a), for an order striking the following portions of the FACC: (a) Paragraphs 30, 42, and 47, and Prayer Paragraph 2; (b) Paragraphs 30, 42, and 47, and Prayer Paragraph 2; (c) Prayer Paragraph 7, insofar as it seeks attorney’s fees; and (d) and all allegations and requests for relief seeking recovery for injuries.

Rather than opposing the Demurrer and Motion to Strike, on July 22, 2026, Nguyen filed a purported 10-page Second Amended Cross-Complaint (“July 22 SACC”).

“A party may amend its pleading once without leave of the court at any time ... after a demurrer or motion to strike is filed but before the demurrer or motion to strike is heard if the amended pleading is filed and served no later than the date for filing an opposition to the demurrer or motion to strike. A party may amend the pleading after the date for filing an opposition to the demurrer or motion to strike, upon stipulation by the parties.” (§ 472, subd. (a) (Section 472).) That section, however, cannot be relied upon by a party to further amend an already amended pleading. (Hedwall v. PCMV, LLC (2018) 22 Cal.App.5th 564, 575 [“under section 472, the right to amend a cross-complaint as a matter of right is...limited to the original version of the cross-complaint”.])

3 All subsequent statutory references are to the Code of Civil Procedure unless otherwise specified.

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